Despite the expected dip in profits in the year to June, shareholders in Cochlear Ltd (COH) will receive a slightly higher final dividend, on top of the raised interim.
Cochlear yesterday reported a 16% drop in full-year profit, in line with a June downgrade, as the world’s biggest maker of hearing implants was hurt by a drop in foreign exchange-related profits and revenue weakness in the US from a delay to a key new product.
The result seems to confirm that the company is back on track after two rough years when earnings came under pressure from the unfortunate product recall in 2011-12 and then the impact of the high dollar and the slower than expected rollout of a new product in the US market.
Cochlear told the ASX that net profit after tax for the year ending in June fell to $132.6 million from $158.1 million in the 2012 year. (The 2011-12 year was further cut by around $100 million to $58 million, because of the costs of a major product recall.)
That was just below analysts’ forecasts of around $133.6 million and the downgraded guidance in June of a fall of up to 18% in net earnings to a range of $130 million and $135 million.
Final dividend was upped 2c to $1.27 a share, making a total of $2.52 a share, up 7c a share from what was paid in 2011-12.
The company said it has received the approval for sale of its latest Nucleus 6 implant in Europe and the product’s roll-out is now underway.
Cochlear shares slipped 1.1% to $58.50 after the release of the results, then rose to end up 1.5%, or 87c at $60.02 as analysts liked the forward commentary on the new product release.
COH 2Y – Cochlear back on track after two rough years?
Despite the earnings fall, Cochlear said in the ASX statement that, "it enters the 2014 financial year with a strong product pipeline that continues to drive growth. Nucleus 6 is currently being rolled out in Europe and regulatory approvals in other jurisdictions are anticipated during the year.
"Timing of regulatory approvals and effectiveness of the Nucleus 6 launch execution will be important for the F14 result.
"The building blocks underpinning Cochlear’s long-term growth are firmly in place.
"These include excellent technology partnerships; the developing Macquarie Hearing Hub; a growing global footprint; sound financials; and leading market share.
"These strengths, along with our ongoing investments in R&D and the sound fundamentals of the market in which we operate, give Cochlear great confidence in the company’s long-term, sustainable growth prospects," directors said.
Total revenue for the latest year was $752.7 million, down 3% on 2011-12.
Sales, excluding foreign exchange contracts, were $715.0 million, up 1%. In constant currency (that is restating 2011-12 figures at 2012-13 rates) 2013 sales were up 3%.
"Cochlear implant sales, which included sound processor upgrades, were $636.4 million, up 2% and up 3% in constant currency," directors said.
"Cochlear implant unit sales were 26,674, up 16%, Bone Anchored Solutions sales of $78.6 million were up 1% and up 2% in constant currency. FX contract gains of $37.7 million were down 49% on F12 ($74.4 million)."
CEO, Dr Chris Roberts said in the statement:
“We are proud that once more a record number of recipients received one of our implants. Our mission is to help people hear and be heard, empowering them to connect with others and lead a full life.
“Approval for sale of Nucleus 6 in Europe has just been received and product roll-out is now underway. Nucleus 6 is the most advanced cochlear implant sound processor ever released both in terms of hearing performance and usability.
“During F13, we continued investing in key business drivers and remain confident in our ongoing growth. Cochlear is well placed with new products, market growth initiatives and systems and processes in place supporting our long-term future.”
The one thing that didn’t get much comment in the company’s own analysis yesterday was the impact of the Aussie dollar’s 15% decline in the past two months. That could be a sweetener for Cochlear now that its product launches seem to be back on track.
